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Small business owners are showing optimism on economy

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Amid recent market turmoil and troubling developments abroad (most notably slowing growth in China), the U.S. economy has been sending some positive signals.

Gross domestic product in the second quarter grew by a faster than expected annual rate of 3.7 percent. Many part-time jobs are being converted to full-time jobs. And the federal deficit continues to shrink.

There is yet positive news to report. The latest comes from a new Principal Financial Group survey of some 600 business owners of small and mid-size companies (SMBs) with 10-500 employees. A key finding of the research: These owners are feeling more confident about the current and future state of the economy.

The 2015 annual “Principal Financial Well-Being Index: Business Owners” finds that 45 percent of small business owners are optimistic about the economy, up from 26 percent in 2012. And a whopping 92 percent of owners rate the financial health of their business as “growing or stable.”

Small business owners not only believe in the current success of their businesses, but believe the economic climate will hold and allow for prosperity in the next year. Sixty-six percent believe their business financials will improve in the next 12 months, up from 55 percent in 2014.

However, of the 74 percent of business owners that report having surplus capital, more than three-quarters (77 percent) are not spending it. They most commonly cite saving for future growth, economic uncertainty and lessons from the economic crisis as their primary reason for not spending surplus capital.

“We are seeing a clear rise in financial confidence from small business owners,” said Amy Friedrich, senior vice president at the Principal Financial Group. “When business owners are adding jobs, increasing wages and adding benefits, we know they’re feeling good about their business, which bodes well for economic growth.”

They survey also finds that:

  • Half of the business owners who added to staff in the past 12 months have seen a positive return on their investment.

  • Approximately four in ten (42 percent) of business owners plan to add to staff, while 10 percent plan to reduce staff.

  • Significantly more business owners plan to add employee benefits this year than last year (32 percent vs. 22 percent).

  • Millennial business owners (48 percent) are significantly more likely to add employee benefits than Gen X (31 percent) and baby boomer (23 percent) business owners.

  • Approximately one third (32 percent) of business owners plan to increase employee wages in the next 12 months.

  • Thirty percent plan to expand business operations in the U.S. and 12 percent plan to expand business operations internationally.

See the slides beginning on the next page for additional highlights from the survey.